Eromosele Abiodun urges the federal government to take urgent steps to address the various issues impeding smooth operations at the nation’s ports
Like many sectors of the economy, the maritime sector is as old as the country itself. Like the many issues facing the country, the maritime sector is also bedeviled by many challenges that look impossible to resolve.
Oil was discovered in commercial quantities in Nigeria in 1956, four years before independence from Britain. Before then, maritime activities in Nigeria had largely been stimulated and sustained by export of agricultural products and solid minerals for earning of foreign exchange. The leading agricultural exports then were groundnuts, cocoa, palm produce and rubber. With the discovery of oil in commercial quantity in 1956 at Oloibiri by Anglo-Dutch consortium, Shell D’Arcy, the oil and gas sector become the main driver of the economy and of maritime activities in Nigeria.
But the state of the ports is a critical factor for efficient maritime operations. Hence the establishment of the Nigerian Ports Authority (NPA) by Ports Acts (Cap 155 LFN 1954) was to create a structural framework for the management and regulation of port operations. The authority executed its first wharf extension project between 1956 and 1961 in Lagos and Port Harcourt ports. Further expansion of Lagos Ports were done between 1970 and 1975 and, in 1977, the Tin-Can Island Port Complex was commissioned to ease the pressure of heavy imports (mostly government cargoes) on Apapa Port. In 1979, the Warri and Calabar ports were commissioned. Port construction and expansion continued between 1981 and 1985; the Sapele port was constructed in 1982. In 1996, Federal Ocean Terminal Onne Phase 1 was constructed. Financing was done through agreement with the International Bank of Reconstruction and Development and the World Bank.
Statistics in the mid-1980s showed that the public ports operated at 47 per cent of their capacity at the best and cargo throughput dropped down to 28.7 per cent of previous years. To increase efficiency, enhance capacity and introduce healthy competition in government enterprise. Government in 1988 promulgated the Privatisation and Commercialisation Decree. In 1993, the implementation of the commercialisation programme of the NPA was partially carried out and it became Nigerian Ports Plc. This was reversed in 1996 as a result of inherent weakness of the policy and government, through the National Council on Privatisation (NCP), upgraded the state of NPA from full commercialisation to partial privatisation called concession, to make room for private sector involvement in port operations.
Following the calamitous multi-year port congestion that gripped the nation’s ports and arrested Nigeria’s development for much of the oil boom years of the 70s, the federal government made efforts to reform the system. The efforts never yielded any reasonable fruits as corruption and inefficiency reigned, denying government the needed revenue from the sector.
As a result of the painful experiences of congestion in the 70’s, the federal government again made efforts to reform the Nigerian Ports Authority (NPA) in the 1980s.
Consequently, the NPA management was restructured into four zones: Western, Central, Eastern and Headquarters. The government also created Nigerian Ports Plc. However, the policy failed abysmally due to rear-guard action from the diehard culture of centralisation. Government interference was rife and patronage and self-enrichment by some government officials overseeing chunks of the maritime sector hit a new level. Foreign exchange earnings from Nigerian Ports Plc disappeared into private pockets and port infrastructure were allowed to rot.
In a bid to arrest the situation, the federal government, in 2001, came up with the idea of concessioning the ports to qualified private operators.
Dutch firm, Royal Haskoning BV was commissioned to study Nigerian ports preparatory to the reform.
The report, called Haskoning Study, was submitted to the federal government and was accepted as a cogent x-ray of the Nigerian seaport system. The report criticised the over-centralisation of administration that saw NPA function as both regulator and operator; the overlap of authority in the system and the duplication of efforts. It recommended a “Landlord” port administration model where government’s role would be restricted to policy formulation while private operators undertake the day to day running of terminal operations, stevedoring, warehousing; and investments in port equipment and infrastructure, among other activities. The report called for NPA to be unbundled into three zones and for concessions by open bidding.
After examining the report, the National Council on Privatisation (NCP), endorsed the “landlord” model, and under a new transport policy, NPA was given the role of technical regulator to manage the ports for which there were no bids. The National Transport Commission (NTC) was to become commercial regulator while National Ports Commission would become overall coordinating agency for the ports sector. Five landlord port authorities were slated for Lagos; the Niger Delta; Port Harcut; Calabar; and the inland ports. A total of 25 concessions were identified in 11 ports and there were bids from 110 companies to manage eight ports: Bonny, Calabar, Koko, Port Harcourt, Sapele, Apapa, Tin Can & RORO.
With bids submitted by March 2005, concession commenced in 2006 with 20 concessions concluded. In March 2006 the concessionaires commenced operations.
The flagship concession, Apapa Container Terminal was signed in March 2006 with APM Terminals, which had taken over P&O Nedlloyd earlier in the year. The Danish shipping firm, A.P. Moller (APM Terminals’ parent company beat 25 other bidders to the 25-year concession.
Doing Business at the Ports
Prior to the concessioning of ports to private operators in 2006, doing business in the nation’s ports was a hellish experience laced with a myriad of problems.
Some of which were turnaround time for ships which took too long making businesses to brace themselves for weeks if not months of endless waiting before their cargo could be loaded or discharged.
“Most of the few cargo-handling facilities owned by the NPA were moribund, so shipping companies had to hire such facilities from private sector sources, leading to extra costs.
Dwell time for goods in port was so long that overtime cargo filled the most active seaports and led to massive port congestion. Labour for ship work was controlled by a mafia that controlled dockworker unions and had no scruples supplying less than the manpower paid for. Many port premises that could have been put to good use were abandoned, giving maritime businesses less options.
In the road sections of the ports, massive portholes were the norm, rather than the exception, and this did nothing to reduce waste of man hours brought about by snail-like movement of goods to and from the ports. The resulting congestion led to consignments becoming untraceable as if they suddenly disappeared into thin air, and in such cases, NPA often seemed helpless in effecting the return of such absconded cargoes, to the chagrin of hardworking businesspeople. As a result of porous entry points, dangerous miscreants also known as wharf rats swarmed the ports to also eke out their daily bread, leading to predictable tales of woe on the part of responsible business people,” said a leading operator.
However, following the concessioning, there has been some improvement in port operations in areas relating to anchorage/berthing, ship turnaround time, throughput time, clearance and yard handling. Though considerable progress has been recorded, there is still great room for improvement given the evolution of trade patterns globally and increase in cargo tariff.
A report by Financial Derivative Company (FDC) and the Lagos Chambers of Commerce and Industry (LCCI), revealed that the cost of trading goods remains a significant hurdle with the import and export times’ reduction of 25 per cent and six per cent respectively since 2013, Nigeria’s seaports still rank as the most expensive in West Africa.
On the import side, the report stated that extra costs related to yard handling fees (which include demurrage and storage) represent an extraordinary 77 per cent of the total cost, driven by longer-than-ideal border clearance times, yard handling procedures, and informal payments to customs and other government agencies.
“Extra costs related to transportation between the port and Lagos warehouses represent 94 per cent of the total cost, driven mostly by congestion and poor road conditions. Additionally, 41 per cent of the cost to import is attributable to inefficiencies or informal payments. On the export side, costs are lower than import costs, but distributed similarly. Conclusively, 43 per cent of the cost to export is attributed to inefficiencies and informal payments. The major driver of extra costs on the export side is also transport between Lagos warehouses and the ports, due to congestion, freight forwarding and yard handling costs.
“Nigeria’s ports have seen 3.3% Compounded Annual Growth Rate (CAGR) in Gross Tonnage of 144.2 million tons within the past five years and an annual growth of 1.8 per cent is expected until 2021. Notwithstanding this progress, the United Nations Conference on Trade and Development (UNCTAD) report indicates that Nigeria trails far behind many smaller economies in Africa in terms of ports and maritime activities. According to the report, Nigeria ranked 4th in Africa in maritime industry by size of annual quantity of Twenty-foot Equivalent Unit (TEUs) in 2014. Specifically, Egypt ranks first with 8,810,990 TEUs, South Africa (4,831,462 TEUs) and Morocco (3,070,000 TEUs) respectively while Nigeria reported 1,062,389 TEUs,” the report said.
It added, “Severally, survey from port users indicated that it takes an extended number of days (five to14 days) to clear a container at Nigerian ports.”
This, the report added, is a far cry from what obtainable at the ports of neighboring countries such as Republic of Benin and Ghana (with 48hours cargo clearance time).
Exporters of fragile goods, the report revealed, complained of about 20 per cent damage to their goods due to bad port roads and poor physical infrastructure within the port terminals.
This, it stated, is compounded by unwieldy documentation process making importers and exporters go through the pain and associated costs of processing about 25-33 different papers from multiple agencies and departments.
Port Location Problems
Furthermore, the report added that the Lagos maritime ports which process more than 70 per cent of Nigeria’s non-oil exports are located in populous urban areas and as such, constitute a major strain on key roads which cause congestion and environmental issues.
This, it added, is compounded by the absence of a functional rail transport system to compliment the over used and dilapidated road network.
“Due to the urban location and being a major transit route of imported refined petroleum products, ports in Lagos are susceptible to considerable disruption in the event major or minor “shocks,” such as fuel scarcity which translates to long queues blocking major roads or regular vehicle breakdown that blocks key feeder road. The road systems linking the ports complex are regularly congested. The mix of cargo trucks, buses, cars, and other users stretches the capacity of the roads. Faulty and parked cargo truck awaiting access to and from the ports do exacerbates the already bad situation. The Nigerian trade imbalance appears to be very evident on the ratios of laden and empty container flow at its ports. In 2014, record shows an empty and laden container ratio of 85 per cent and 15 per cent respectively at the Nigerian port.
“Only port reform and improved doing business conditions are needed to reverse this imbalance. Furthermore, Nigerian ports are yet to conform to international standards in the adoption of electronic payment of Customs duty; electronic container loading list and electronic risk-based inspection. Presently, physical examination is still the major form of container inspection as opposed to electronic scanning. Port Users Survey conducted by NEXTT in 2015 reveals that physical examination of containers accounts for 47 per cent of container inspection while electronic scanning constitutes 27 per cent of terminal operator’s container inspection rates,” it added.
The LCCI report noted that persistent delays in the clearance of cargo at the Lagos ports have become a major cause for concern for the business community.
It added that the Pre-Arrival Assessment Report (PAAR) arrangement being managed by the Nigeria Customs Service (NCS) is evidently fraught with capacity challenges.
“The PAAR, which was originally programmed to be issued within six hours now takes over a week in most cases before it is released. Without the issuance of PAAR, other cargo clearance procedures cannot progress. Closely related to this is that the NCS officials do jerk up the value of containers and at the same time determine issuance of alert, leading to delay in processing time. It is advised that PAAR values should not be arbitrarily jerked up above invoice values.”
Shipping Companies and Terminal Operators
Terminal operators, the LCCI said, are not maintaining or renewing the facilities at the terminal.
“They charge high fees without recourse to any regulatory approval. For now, there is no clear agency in Nigeria that regulates the activities of Terminal operators. The terminal operators also face incessant server breakdown. This leads to delay in the dropping of containers for physical examination and processing the Terminal Delivery Order (TDO). Also, booking should be made immediately terminal payments are affected. In other words, container dropping process for physical evaluation should be modified, which implies that containers should be dropped when terminal charges paid are updated.
“Shipping Companies should replace obsolete servers with modern electronic ones in order to forestall server failure and breakdown, which causes adverse interruption in port operations, resulting in high cost of demurrage and delays in the collection of debit notes. Nigeria is lagging behind in ship businesses and spending so much on freight payments. Thus, the present reform must suggest road map for indigenous participation in shipping,” it stressed.
Eliminate Human Interface
The report stressed that the Standards Organisation of Nigeria (SON) should enforce rules that moderate the chances of human interface in its processes.
This, it advised, will eliminate the rate of complaints relating to its official intimidation of businesses and illegal levies demanded from trucks on the road after they had been cleared at the Port.
Charges at Bonded Terminals
“It is noted that when containers are transport to the bonded terminal as a result of congestion at the Port, the Terminals often add 100 per cent extra charges to the containers thereby increasing the cost of clearing. There are high incidence and reported cases of the containers being vandalized or stolen at the terminals.
“There are evidences that congestion at the Port was also compounded by the trucks returning empty containers. It is suggested that a separate bay for empty containers should be constructed to ease the congestion and traffic at the Ports, “LCCI said.
Multiplicity of agencies
The LCCI noted the presence of too many security agencies at the ports such as Plant Quarantine, Vet Quarantine, State Security Service (SSS), Police and Bomb Squad, NAFDAC, NDLEA among others.
Their respective functions, it added, are apparently interwoven and need to be consolidated.
“There are so many parallel units within NCS and each group working at cross purposes making things more difficult for port users. Unfortunately, each of the agency prefer to carry out an independent check on the same container. This leads to waste of time, unnecessary fees, fine, charges and high operational cost.
“Additionally, the constant demand for gratifications from port users fuel corruption tendencies at the port which further raise the cost of clearing. Most these cost are difficult to transfer to the importer or end customers. The former administration in 2010 reduced the number agencies at the Port considerably to six. Sadly, many agencies have since found their way back into the Ports and coursing all sorts of hindrances,” it explained.
Truck call-up systems
LCCI noted that the menace of trucks, trailers and tankers on port roads in particular, and the national road network in general has assumed an unbearable dimension.
This, it warned, need to be addressed through the adoption of truck parks and truck call-up systems.
It stated, “Private sector can easily invest in this project if the right policy and regulation is put in place. The near-by port in Cotonu, Benin Republic has since adopted this model and it has improved efficiency and better use on manpower. The Trailer Park which is under construction in the neighbourhood of the Tin Can Island Port should be urgently completed to reduce the menace of trucks and tankers on Lagos roads. It is gathered that this trailer park is 80 per cent completed already and it should be run using the Truck call-up system.
“This research is concerned about the deplorable condition of the roads around the Port and proposed that the government should do something even if it’s temporary to alleviate the sufferings of commuters. The long term approach is to initiate good reforms that allow private sector investment in port roads and other physical infrastructures. Above all the rail system designed to evacuate cargo from the Lagos Ports need to be resuscitated as a matter of urgency.”
The report noted that stakeholders expressed grave concern over the deplorable state of roads leading to the Lagos Ports – Apapa and Tincan Island Ports.
These Ports, it added, account for over 60 per cent of the cargo into the Country and an estimated 70 per cent of customs revenue.
“The poor state of the roads has had multifarious effects on the private sector, economy and the citizens. Persistent delays in the clearance of cargo at the ports have become a major cause for concern for the business community. This situation has the following implications: Risk to the lives of citizens arising from containers falling off the trucks as a result of bad roads. Several lives have been lost in recent past as a result of this.
“Congestion at the Ports resulting from the delay in the evacuation of cargo from the ports, high demurrage paid by importers to Terminal Operators and Shipping Companies as a result of delay in the clearance and evacuation of cargo in the ports, high cost of transportation for evacuating cargo because of the prolonged engagement of the trucks by importers arising from the delays, serious traffic congestion along the roads leading to the Ports, which often spills over into the Lagos metropolis causing severe traffic jam and loss of man hours in Lagos and delays in getting raw materials and other inputs from the ports to the factory premises in Lagos and other parts of the country.”
In conclusion, the reports stressed that the unfriendly business environment such as the situation we currently have in the ports continue undermine the capacity of investors to maximize abundant trade and democratic opportunities in Nigeria.
It added that one of the major shortcomings of the investment environment in Nigerian is cargo delays at the ports. The 48-hour target set by government is still far from being achieved.
Speedy processing of import and export
Documents, it stated, are important elements of trade facilitation process; “it is also a major variable in the 2016 World Bank Ease of Doing Business ranking in which Nigeria ranked very low at 169 out of 185 countries profiled. This has made very difficult to achieve any of the port reform objectives set by the past political administration as listed below: To improve the overall efficiency of the port operations, to reduce the cost of doing business at the ports for users and operators, to decrease government expenditure and boost its revenue, to boost economic activities by the introduction of the private sector and to make Nigerian ports the hub for international freight and trade in West Africa.”
It added, “Estimates from the research show that trillions of naira in revenue lost annually within the port and business community due to inefficiencies and inherent shortcomings of the nation’s maritime ports. It is evident that recommended reform measures if implemented can reverse this leakage within in the near term. Moreover, about 10,000 new jobs in the maritime port sector and approximately 800,000 jobs in the industry can be generated over the same period giving a more efficient and productive port in Nigeria.
According to the report, these estimates are potentially feasible under the assumption that the port can double its 2014 non-oil volume of 1.1 million TEUs within a period of 24months and from that point, grow consistently at 15-25 per cent annually. It is widely acknowledged that coordinating the reforms in the maritime port is predicated on the buy-in of the Presidency and National Economic Team.
Public authorities and the private sector have come to a convergent realization that one of the starting points for activating the diversification objective of the present government is fixing the ease of doing business at the nation’s ports. “The time is now.”
Thus, it stressed that a well-coordinated reform in the nation’s ports at this time will give significant boost to non-oil economy, output growth, greater wellbeing of the citizens and democratic gains.
Overall, the report stressed that political will that flow right from the presidency down to the MDAs is the most essential enabler to enforce and sustain the reforms.